Estate Planning for Your Blended Family
While estate planning is important for every family, it can be critical for couples in second or subsequent marriages. New relationships that grow later in life can be wonderfully fulfilling, but the children and assets each partner brings to the family can create complexities. A thoughtfully-crafted estate plan can bring harmony to blended families by assuring all members that they will be treated fairly.
There are many strategies that can help you address the unique estate-planning needs of your blended family. Among them are:
Title assets carefully. When real estate is owned jointly in marriage, there is a right of survivorship for the owner who survives. That is, after the first owner dies, the other owner will own the entire property. If you would rather each half of the property be transferred to each spouse’s separate heirs upon death, there are several options. You can create a tenancy in common, grant a life estate to your spouse and the remainder to your children outright or in trust, or you can place your property in trust, with instructions regarding how the asset is to be divided after you pass. Each option has advantages and disadvantages that you will want to discuss with your estate planning attorney.
Create Marital Trusts for the lifetime needs of your spouse. If you leave assets to your new spouse in your will and you pass first, your spouse will then be able to decide what happens to those assets in their own estate plan. That is, they could give your assets to anyone of their choosing after your death, potentially leaving your children or other family members out. Trusts can allow you to provide for your spouse during their lifetime and direct how the rest of your estate will be distributed after your spouse’s death.
Provide for children of different ages. There are many options to help you ensure that children of prior unions and younger children of a new union are treated equitably. Many families choose to create a trust for the care of minor children while leaving bequests to adult children, either outright or in trust. If there are not enough funds to meet the prospective needs of both minor children and older children, life insurance policies can bridge the gap.
Coordinate beneficiary designations to complement your plan. Some assets will pass to your beneficiaries outside of your will and probate, such as retirement accounts, life insurance payouts, and any accounts for which you have made transfer-on-death designations. It is critical to consider these kinds of assets when crafting your overall estate plan. Beneficiary designations can be made in shares, giving you more planning flexibility, or you can designate a trust as a beneficiary for more nuanced or long-term planning. After the SECURE Act, there are special considerations when it comes to naming non-spouse beneficiaries for your retirement assets, including potentially significant income tax consequences, so consulting with your financial advisor, tax advisor, or estate planner is a must.
If you are in a new partnership but choose to remain unmarried, you can still use many of the same strategies to provide for each other in your estate plans. There are, however, fewer tax benefits for an unmarried partner who inherits, especially when it comes to retirement assets, so it will be important to take that into account as you plan.
Treetown Law is proud of serve families of all kinds. We are here to help you keep your relationships, values, and love at the center of your estate plan. Reach out to get started today!
Are your or someone you love in the beginning stages of divorce or just recently divorced? Be sure to check out our earlier blog posts to help navigate the process:
